Building society comes to Major's rescue on cuts

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Indy Politics

Chief Political Correspondent

The Prime Minister yesterday refused to withdraw controversial plans to cut unemployment protection in social security benefits for mortgage holders.

Mr Major got off the defensive by pre-empting an announcement by the Skipton Building Society that it will provide free mortgage protection for the unemployed.

The Prime Minister urged other building societies to follow the Skipton, which rushed out its announcement within hours of clashes in the Commons between Mr Major and Tony Blair, the Labour leader.

A spokesman for the building society said: "We were delighted. There was contact between the Government and the building society. Where things went awry was over the timing."

However, announcing the scheme, John Goodfellow, the chief executive and director of the Skipton BS, said he did not agree with the Government's decision to cut mortgage protection, which is to be attacked by Labour in a full-scale Commons debate next week opened by Mr Dewar.

The Skipton scheme rescued the Prime Minister from an attack in the Commons by Mr Blair over the social security mortgage protection cuts, which the mortgage lenders have warned will hit the housing market.

The Labour leader raised the issue after the National Association of Citizens Advice Bureaux joined a growing chorus of organisations against the cuts in social security cover, which many Tory supporters fear will hit natural Tory voters.

Mr Blair demanded: "As a withdrawal of mortgage help for those that become unemployed, the vast majority of homeowners and in particular new homeowners will have to take out mortgage insurance.

"What's your estimate of the cost to a homeowner on an average mortgage of that policy?"

The Prime Minister refused to put a figure on the cost, but told him: "Any responsible Government must review the size of the social security budget, now running at well over pounds 80bn of taxpayers' money."

Under the present system, borrowers may qualify for 50 per cent of the interest to be paid for the first 16 weeks of a claim on social security. After that period, the full interest will be paid on income support for mortgages up to a ceiling of pounds 100,000. But after 1 October, this year, the cuts will mean it will be paid only after the first nine months.

Those with part-time income or a working spouse or partner would not qualify for any help on social security benefit. A typical private insurance scheme would cost an average pounds 35 per month on a mortgage of pounds 50,000 for full accident, sickness and unemployment cover.

Alarm over the rising cost of social security was raised by the cross- party Commons select committee on social security, chaired by Frank Field, the Labour MP. After an extensive review lasting two years, it warned of increasing numbers of young, single mothers who were not in stable relationships and that barriers to work were causing more lone parents to depend on income support rather than jobs.

The committee said it would be carrying out a fresh inquiry into whether an insurance-based welfare system could be re-established with new provision by employers and employees.

Social Security Committee, third report, Review of Expenditure. HMSO pounds 28 net.